March 29, 2011

BY EMAIL

Ms. Torlanda Archer Chief, Special Authorities Division, X-46 Office ofInternational Aviation U.S. Department ofTransportation 1200 New Jersey Avenue SE Washington DC 20590

Re: Waiver Application ofSpirit Airlines, Inc.

Dear Ms. Archer,

Pursuant to 14 CFR §§ 212.12 and 380.3(e)
, Spirit Airlines ("Spirit") hereby requests a waiver ofcertainprovisions ofthe Department ofTransportation's Public Charterregulations to the extent necessary to pennit Spirit to operate public charter flights, to the extent authorized by the Department ofTreasury Office ofForeign Asset Control ("OFAC"), from Fort Lauderdale, Florida to Havana, Cuba. Specifically Spirit requests waiver ofthe financial security arrangements required by 14 CFR §§ 212.7, 212.8,380.34, 380.34a
, and 380.35. As discussed below, grant ofthis waiver will advance the public interest by expanding lower cost service options available to family members and others who are authorized to travel to Cuba.

Background

Spirit is the largest low-fare operator to the Caribbean and has substantial experience in the market. Spirit regularly conducts flights to 24 Caribbean and Central American destinations, including, Port au Prince, St. Maarten, St. Thomas and multiple locations in the Bahamas, the Dominican Republic, and Puerto Rico. Additionally Spirit has daily flights to nearby locations in Mexico, Costa Rica, EI Salvador, and Colombia. Spirit will operate Cuba charters with the same reliability as its scheduled service to these Caribbean and Central American destinations.

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,**'{ f~**  \\ "**:;, ,,-** **·t" .** **~, '**  . :\l()lli' \\: " : : ! ;:**l;~**Ms. Torlanda Archer Spirit Waiver Request March 29,2011 Page 2 of6

A dramatic increase in demand for flights to Cubahas resulted from Obama Administration policies that eased the regulatory burden ontravel by Americans to Cuba. On April 13,2009, President Obama initiated a policy to promote democracy and human rights in Cubathrough the facilitation ofperson-to-person contactbetween Cubans and Americans, specifically, by broadening the category ofAmericans eligible to receive authorization to visit family members in Cuba and lessening the restrictions placed onthe frequency ofvisits. 1 Removing restrictions ontravel by family members resulted in a dramatic increase in the number ofAmerican visitors to Cuba, growing from 80,000 in 2008 to over 330,000 in 2010. 2

OnJanuary 14, 2011, the President released a memorandum further lifting restrictions on travel to Cuba, allowing for academic, religious and cultural trips to Cuba. 3 To better serve those visiting family or engaging in otherpurposeful travel to Cuba, the President authorize expanding the eligible points ofembarkation and debarkation for Cuban flights beyond the Los Angeles, Miami, and NewYork JFK airports. In accordance withthe memorandum, the Department ofHomeland Security, Customs and BorderProtection ("CBP") establishedprocedures for any U.S. international airportto apply for a license to serve flights to and from Cuba.4 Pursuantto these procedures, onMarch 8, 2011, Fort Lauderdale-Hollywood International Airport (FLL) was approved by CBP as one ofthe new gateways for licensed Cubacharter flights.

These Presidential Directives seekto further democracy and humanrights in Cuba by promoting person-to-person contactbetween Cubans andAmericans. This is achieved through expanding the number ofpeople eligible to travel to Cuba and making more travel options available. Despite the intent to enable more travel to Cuba, air service to Cubaremains restricted to licensed charter flights. The operator-participant contract requirements may be beneficial to ensuring thatpassengers fully understand theirrights and obligations as a charterparticipant and help ensure thatpassengers on flights to Cuba possess proper Office ofForeign Asset Control ("OFAC") authorizations. However, Part 380 also imposes limitations on direct air carriers that do not apply to scheduled air service and are not relevant to the unique requirements for travel to Cuba. Specifically, the financial securityrequirements place a burden on air carriers and are notnecessary for Cuba flight because OFAC itselfrequires that carriers certify their financial responsibility
to operate the flights. 5

I Presidential Memorandum for the Secretary ofState, the Secretary ofthe Treasury, and the Secretary of Commerce, Aprill3, 2009.

2 Marc Frank, BigJump Seen in U.S. Travel to Cuba in 20I0, REUTERS, Dec. 6, 20IO.

3 Office ofthe Press Secretary, Reachingoutto the Cuban People, Jan. 14,201 l.

4 Airports ofEntry or Departure for Flights to and From Cuba, Final Rule, DHS, 76 FR 5058 (2011)

5 Office ofForeign Asset Control, Travel, Carrier and Remittance Forwarding Service Provider Program, Circular2006, at p.7; Appendix II (2006) (outlining the operational guidelines for travel and carrier service providers with specific operator-participant contract requirements, but do notreference the fmancial arrangements).Ms. Torlanda Archer Spirit Waiver Request March 29, 2011 Page 3 of6

14 C.F.R. Parts 212 and 380 (the "CharterRules") require certificated air carriers who wish to sell Public Charter flights directly to the public to furnish a security agreement that insures the financial responsibilities ofthe air carrier and to enterinto a depository agreement with a designated bank whereby the bank will maintain charter participant funds and disburse those funds to the air carrieronly after completion ofa charter flight. These financial security arrangements may be ofparticularimportance for flights operated

# bl charterair carriers. However, these requirements impose burdensome transaction costs, which increase the price ofCubacharters to consumers and are inhibiting Spirit from offering low cost charters to Cuba.

Necessity and Public Interest

Spirit desires to meet the demand for flights to Cuba in a manner and at a price similar to its current scheduled service to other Caribbean destinations; however, this
cannot be accomplished without waiverofthe financial security arrangement requirements. Granting this waiverwould serve the public interest by enabling an experienced, financially stable, low-cost air carrierto provide additional low fare service options for travel to Cuba. In accordance with the President's Directives designedto encourage positive change in Cubathroughperson-to-person contact, this waiverwould allow for increased contact between Americans and Cubans by expanding the travel service options available to licensed travelers, increasing competition and decreasing prices in the market. Passengers could connect to Spirit's wide service network which would allow low cost travel from airports across the U.S. to Havana, Cubaviaconnection
to its charter flights in Fort Lauderdale.

Expanded and low-cost service options to Cuba are in the public interest. Currently, charter service between Miami and Havana (an hour-long flight) routinely
costs over $350 for a round trip ticket.7 Before, the Administration's easing of restrictions on travel to Cuba only a handful ofcharter companies regularly flew to Cuba from Florida, where the largestnumber ofCuban-Americans eligible for travel to Cuba reside.s According to Mauricio Claver Carone, director ofthe U.S.-Cuba Democracy PAC, these chartercompanies "are a virtual cartel that control the travel sectorfrom the U.S. to Cuba, charging egregious fees in collusion with Cuban authorities.,,9 The demand for flights to Cuba has more than doubled since the President first lifted travel restrictions in 2009 and continues to grow. IO Notwithstanding this growth there remain

6 Revision ofAviation Charter Rules, DOT Final Order, 63 FR 28225, 28230 (1998).

7See. e.g., Marazul fares from Miami to Cuba, http://www.marazul.com/tlightMiamifareseng.htm!. (ranging from $350 to $480 for a round trip flight to Cuba from Miami).

8 Damien Cave, Charter Companies**F~ying** to Cuba Thrive Despite Complaints. NEW YORKTIMES, May 19,2009 availableathttp://www.nytimes.com/2009/05/20/usl20cuba.html.

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d.

10 Marc Frank, BigJump Seen in 

## u.s. Travel to Cuba in 2010, REUTERS, Dec. 6, 20IO available at http://www.msnbc.msn.comlid/40533558/nsltravel-destination travel!.

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only a small number ofcharteroperators who are licensedproviders and licensed air carrierproviders serving the Cuba charter market. Expanded service options will be necessary to meet this demand and prevent monopolistic pricing structures.

In orderto provide reliable, low-cost service to Cuba Spiritrequests a waiver of the financial security requirements in14 CFR §§ 212.7, 212.8, 380.34, 380.34a, and 380.35. These requirements are unnecessary to protect funds ofcharterparticipants flying on Spirit, and they unnecessarily increase the cost oftravel to Cuba, such that Spirit will be unable to charge low fares commensurate with those it provides to other Caribbean destinations. Waiving these requirements for Spiritwould promote the goals ofthe Airline Deregulation Act (ADA) by encouraging an airtransportation system that relies on actual and potential competition, further strengthening a small air carrier and enabling entry into a new market and imposing "the fewest possible restrictions on charter air transportation." 49 U.S.c. 40101(a)(12),(l3) and (e)(3). The elimination of burdensome and unnecessary transaction costs with respectto Cuba charters operated by Spirit is also in accordance with President Obama's Executive Order "Improving Regulation and Regulatory Review" ofJanuary 18, 20II, whichdirects agencies to find the least burdensome means ofachieving regulatory ends. II

Increased protection ofcharter participant funds for Spirit charters is unnecessary. The Department has previously recognized that the financial security arrangement requirements may be unnecessary for established air carriers, like Spirit, who are conducting their own charter flights. 12 Spirit is an experienced air carrierwith adequate financial reserves to assure reimbursement ofcharterparticipant funds in the event ofan improper nonperformance ofservice, therefore a surety bond is unnecessary. Spirit currently operates a fleet of35 A-320 family aircraft and has committed to deliveries of 33 new A-320 family aircraft through 2015 for a total fleet of68 aircraft. In addition, while substantially smallerthan the legacy carriers, Spirit has earned a netprofit eachof the last three years, including net income of$72.5 million in 2010 on operatingrevenue of$781.3 million, despite rising fuel prices and a five day pilot strike in June 2010. Spirit's innovative service and pricing structure allow it to continue to be flexible in the face ofan economically uncertain industry.

Spiritplans to conduct regular charters to Cuba, and would be able to prevent stranding passengers in the event ofa mechanical problem by transferring them to other Spirit flights departing from Havana. Spirit foresees eligible travelers who are not located in South Floridabeing able to travel from points on Spirit's domestic routes to Fort Lauderdale at lowcost and proceed on to Cubaon a low cost Spirit charterflight. This will facilitate eligible travel. In addition, unlike charter operators who may be motivated to cancel flights when demand is low, Spiritdoes not foresee cancellations

II Exec. Order No. 13563 (January 18,201 I).

12 Revision ofAviation Charter Rules, DOT Final Order, 63 FR 28225,28235 (concluding not to eliminate the financial security requirements placed on direct air carriers because no comments were received on the proposed elimination).Ms. Torlanda Archer Spirit WaiverRequest March 29,2011 Page 5 of6

because providing reliable service to Cuba will be importantto maintaining Spirit's overall customer service reputation, further lessening the needto expand protection of Spirit charter participantpayments. 13
Spirit's business model relies on lowercosts through efficiencies and passing those savings onto its customers, and is commitmentto providing affordable air travel to its customers. Unlike major airlines that generate significant gross revenue eachyear, Spirit's operations are smaller and cannot as easily absorb the increased costs createdby the financial arrangement requirements. Spirit'srequest for waiver is specific to the unique regulatory requirements ofentering the Cuban market. Spirit does not intend to conductpublic charter flights to other destinations.

Conclusion

Facilitating additional service between South Florida and Cuba advances the public interest and the Administration'spolicy to lessenrestrictions on travel to Cuba. Grant ofthis waiveris necessary for Spirit to provide air service to Cuba at a price and in

a manner similarto its current service to other Caribbean destinations.

For the foregoing reasons, Spirit respectfully requests a waiver from the financial security arrangementrequirements contained in Parts 212 and 380.

Respectfully submitted,

Joanne W. Young David M. Kirstein Kirstein & Young, PLLC 1750 K StreetNW Suite 200 Washington, D.C. 20006 Phone 202.331.3348 Fax 202.331.3933 jyoung@yklaw.com dkirstein((l{yklaw.com Counsel for Spirit Airlines

IJ Id. at 28227-28 (explaining that flight cancellations are more likely to occuron charter flights for lack of participations because chartercarriers are not subject to the market forces that might modifY the behavior ofscheduled carriers).Ms. Torlanda Archer Spirit Waiver Request March 29, 2011 Page 6 of6

cc: The Honorable Susan Kurland

.Assistant Secretary Aviation and International Affairs Paul Gretch, Esq. Director Office ofInternational Aviation Esta Rosenberg, Esq. Chief, U.S. Air CarrierLicensing Division Office ofInternational Aviation**~'{-l!R** ')0 ' " 

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